Question
Baker Company sells one product. Management estimates that the company will sell 6,000 units of the product each year. The relevant information about the product
Baker Company sells one product. Management estimates that the company will sell 6,000 units of the product each year. The relevant information about the product line of Baker Company for the year ended December 31, 2014 appears below:
Breakeven units: 4,000 units
Variable expenses per unit:
Direct Material: $35
Direct labour: $25
Variable production overhead: $30
Fixed expenses:
Fixed Production overhead $190,000 per annum
Fixed selling and administrative $50,000 per annum
There was no inventory in stock at the beginning or end of the year.
Required:
i) What was the selling price per unit?
ii) Prepare a contribution margin statement for Baker Company.
iii) What is the contribution to sales ratio?
iv) Use the contribution margin approach to compute Baker Companys breakeven point in dollars.
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